TransCanada to Build Lower U.S. Section of Keystone XL Pipeline

Calgary, Canada     TransCanada announced yesterday that they plan to begin construction on the southern U.S. segment of its Keystone XL Pipeline from Cushing, Oklahoma to refineries on the Gulf Coast as they await to file a new application for U.S. approval of the northern oil pipeline segment which crosses the U.S.-Canadian border.

The new plans announced on Monday by TransCanada do not require federal approval.

In December 2011, members of Congress voted in favor of giving the Obama Administration a 60-day deadline to make a decision on TransCanada’s application for the construction of the Keystone XL Pipeline.

On January 18, 2012, President Obama followed the recommendations of the State Department and rejected the application, explaining that the deadline for the decision had “prevented a full assessment of the pipeline’s impact.”

The “full assessment” concerns the environmental impact of the pipeline in the Sands Hill region which contains the Ogallala Aquifer, one of the largest reserves of fresh water in the world that provides drinking water to 2 million people and supports billions in agriculture across the eight state Midwest region.

TransCanada said it would soon reapply with the U.S. State Department for a permit in the northern border-crossing segment from the tar sands region in Alberta to Steele City, Nebraska (see map on left).

A fully operational Keystone XL was originally anticipated to carry up to 830,000 barrels of Canadian crude a day while providing the additional pipeline capacity from the Bakken Shale formation in North Dakota and Montana along a 1,661-mile (2,673-kilometer) path to Texas refineries, according to Bloomberg.

Now TransCanada is faced with having to construct the Keystone XL Pipeline in smaller pieces, one segment at a time.

The 435-mile southern Keystone XL pipeline segment will stretch from major oil storage centers in Cushing, Oklahoma to refineries in southern Texas. It will cost $2.3 billion to build and transport 700,000 barrels of oil per day. The estimated date of completion is the middle of 2013, TransCanada said. 

The Obama administration reported that they don’t oppose the southern segment of the Keystone XL Pipeline and expressed support for TransCanada building the pipeline to Texas.

“Moving oil from the Midwest to the world-class, state-of- the-art refineries on the Gulf Coast will modernize our infrastructure, create jobs, and encourage American energy production,” White House Press Secretary Jay Carney said in a statement on Monday.

TransCanada already operates its Keystone pipeline, which stretches from Canada through the U.S. Midwest, ending in Illinois.

After the southern Keystone XL pipeline segment is completed in mid 2013, it is expected to replace declining volumes of oil from Mexico and South America which is traded as Brent crude oil.

Cushing, Oklahoma is the primary delivery hub for crude oil traded on the New York Mercantile Exchange as West Texas Intermediate (WTI). Since there is no pipeline route between Cushing, Oklahoma and Texas, where the majority of refineries are centered in the U.S., its has caused a glut of oil from western U.S. and Canada, resulting in U.S. oil to trade at a steep discount relative to imported Brent crude oil.









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